JAPAN Law and Practice Contributed by: Makoto Terazaki, Taku Matsumoto, Suguru Yokoi, Naoko Takasaki and Jun Suzuki, Anderson Mori & Tomotsune
eral rule, a 30-day standstill period applies after filing, although this is reduced to two weeks for transactions that are not considered to raise national security con - cerns, and may be shortened further in appropriate cases. On the other hand, the standstill period may be extended for up to five months where necessary. In practice, pre-filing consultations are often used to clarify issues, and it is prudent to allow sufficient time, especially for large transactions or transactions involv - ing core sectors. If review cannot be completed with - in the standstill period, the filing must be withdrawn and resubmitted, and the overall process may take more than one or two months. In particularly sensi - tive defence-related businesses, the practical review period may exceed six months, including pre-filing consultations and resubmission. 6.5 Assessment Criteria The core question in the review is whether the invest - ment is likely to have a material adverse effect on national security, public order, public safety or the smooth functioning of the Japanese economy. The relevant factors include the attributes of the inves - tor, the target company and the contemplated invest - ment, as well as the likelihood of leakage of technolo - gy or information, the stability of supply, the investor’s ownership and control structure, compliance history, board appointments, shareholder proposals and access to non-public information. These factors are not expressly enumerated in the FEFTA itself, but are instead reflected in the review criteria published by the MOF and the relevant min - istries. Accordingly, the competent authorities have a degree of discretion, although in practice, the review is generally conducted within a reasonable range, tak - ing into account precedent and co-ordination among the ministries. 6.6 Conditions, Remedies and Prohibition Where the authorities consider that conditions are required for clearance, they typically propose under - takings to the foreign investor and, after discussions, if the investor accepts them, the conditions are recorded in the filing and become part of the clearance terms. If the investor later breaches those conditions, the
breach may result in an order to change or suspend the investment and may also attract criminal penalties. Typical undertakings include restrictions on the appointment of directors or management, restrictions on access to sensitive information, the maintenance of domestic business sites and production systems, and prohibitions on altering or abolishing key businesses. If the matter cannot be resolved through volun - tary undertakings and agreement, and the investor does not comply with changes recommended by the authorities, the authorities may issue an order to change or suspend the investment. Until recently, the only recorded suspension recom - mendation/order was the 2008 case involving a UK fund’s investment in Electric Power Development Co, Ltd. However, in April 2026, a suspension recommen - dation/order was issued in connection with MBK Part - ners’ acquisition of Makino Milling Machine Co, Ltd. If a transaction is implemented before clearance is obtained, it may be subject to criminal penalties and an order to return the shares or take other necessary measures. An appeal and litigation are available if the investor disagrees, but in practice, there are limited avenues for meaningfully circumventing the authori - ties’ decision. 6.7 Golden Shares and Special Government Rights The FEFTA does not set out any general rules on golden shares, but neither does it prohibit them. Accordingly, outside the foreign investment screen - ing framework, it is possible in individual transactions for the government to hold a specific single share and thereby retain veto rights over key corporate matters such as dissolution, mergers and amendments to the articles of incorporation. A recent example is METI’s position that, as a condi - tion for support for Rapidus, a next-generation semi - conductor project aimed at domestic production of advanced semiconductors, the government will hold a golden share with veto rights over important manage - ment matters. This is intended to address economic security risks such as acquisitions by foreign investors
130 DEFENCE CONTRACTS 2026
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